If an Industry Has a Horizontal Long-Run Industry Supply Curve

question 91

Multiple Choice

If an industry has a horizontal long-run industry supply curve, then which of the following must be true?

• A)An increase in market demand results in firm entry, and so market price declines in the long run.
• B)An increase in market demand results in industry expansion, and so market price increases in the long run.
• C)A decrease in market demand results in firm exit, and so market price in the long run remains the same as before the market demand change.
• D)A decrease in market demand results in firm exit, and so market price in the long run declines in the long run.
• E)Any change in market demand has no effects on firms.

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Definitions:

Selling Price

The amount a company charges for its product or service, set to cover costs and generate a profit.

Net Operating Income

The total profit of a company derived from its operations, excluding non-operating income and expenses, interest, and taxes.

Monthly Sales

The total revenue obtained from sales in a specific month.

Sales Commissions

Sales commissions are payments made to sales employees, usually calculated as a percentage of the sales they generate, serving as an incentive for enhancing sales performance.